EOFY: Preparing Your SME For June 30

EOFY: Preparing Your SME For June 30

EOFY or the end of the financial year is the time when small businesses in Australia need to deal with their taxes. However, in 2020, this period posed numerous challenges thanks to the COVID-19 pandemic, and things look to be going on a similar course in 2021.

In this post, we’re going to take you through some handy tips that will help your Australian small business deal with the accounting and taxation challenges that lie ahead. So, without further ado, let’s get right into it!

  1. Secure your IT systems and data

The COVID-19 pandemic hasn’t only resulted in problems in healthcare and the economy – it’s also been the perfect breeding ground for a wide variety of cybersecurity attacks and email scams. Simply put, if you haven’t put measures in place to protect the data of your company, its customers, and its stakeholders, you should get to it without any further delays.

We recommend updating your software and using strong passwords for giving your system the protection it needs. You can also consider multi-factor authentication, which involves setting a combination of security checks. This ensures the prevention of unauthorized access to your business’ computer systems, online services, and applications. We recommend using MYOB or XERO, which are both online financial accounting software with a slew of helpful features.

You should also focus on keeping the data your company gathers from its customers safe. To do this well, your company should have a privacy policy framework that’s robust.

 

  1. Take the help of the Australian Tax Office (ATO)

The Australian Tax Office (ATO) has made things simpler for SMEs in light of the pandemic. For example, if you and/or your employees are working from home, you can claim 80 cents/hour to cover all your running expenses. This eliminates the need for going through complex calculations.

Both small businesses and employers can access helpful information that has been provided by the ATO. Some of the aspects that the ATO has focused on include:

  • Keeping track of employee JobKeeper payments
  • Instant asset write-off
  • Cash flow boosting

The ATO has also provided a list of legitimate deductions for businessmen working from home, which includes:

  • Costs associated with cleaning your work area at home
  • Bills associated with cooling, heating, and lighting
  • Depreciation of computers and other office equipment
  • Depreciation of furniture and fittings that are part of your home office
  • Computer, furniture, and other small capital items that cost below $300 don’t need to be depreciated, i.e. they can be immediately written off in full
  • Costs associated with the repairs of furniture, furnishings, and equipment of your home office
  • Expenses associated with internet and telecom services

 

  1. Prioritize mental health

Most Australian small businesses failed to meet their financial goals in 2020. Not much is going to be different in 2021, given that COVID-19 is still very much on the rampage around the world. In such a scenario, it’s important that you prioritize your mental health and don’t push yourself too hard to achieve the goals that you outlined in the budget 2021 for your business.

Apart from taking care of your own mental health, you should also encourage open and supportive communication among your employees, even if you are all working remotely. The Australian Government has put out some practical ways in which owners and employees of small businesses can access support for mental health issues.

According to the Government’s recommendations, mental health risks can be managed by identifying hazards, assessing and controlling risks, and continually reviewing control measures for ensuring effectiveness. You should also keep your stress levels in check and ask your employees to do the same by:

  • Maintaining a healthy balance between professional and personal life
  • Exercising regularly for improving stamina and boosting your energy levels
  • Getting enough sleep and eating healthy food
  • Not over-committing yourself
  • Planning events well in advance to be prepared
  • Relaxing through activities such as listening to music, meditation, and/or practicing breathing techniques

 

  1. Keep your financial statements updated and reassess them

Simply put, today’s market is unprecedented, and this should be reflected in your forecasts and budgets. Take your financial advisor’s help and keep your financial statements updated, and don’t forget to reassess them periodically to keep track of accounts receivables.

Go into great detail regarding what the effects of the market are on your workforce and your business operations. If you feel you lack the intuition and foresight to predict the changes in this uncertain market, take the help of the COVID-19 Contingency Plan produced by CPA Australia. This plan is sure to give you a much clearer picture regarding the future of your small business in an uncertain market landscape.

 

  1. Count on your advisors

Financial advisors are more important than ever before, and you should seek counsel from them to steer your business through this uncertain period. EOFY processes can be daunting, and if you want to tackle them yourself, it can impact your business’ productivity negatively.

That’s why if you don’t have a dedicated financial advisor for your business, it’s time you choose one. Thankfully, there are many experts out there who can help you out. While you will have to shell out more money to hire the services of a reputed financial advisor, you should consider it money that will be well spent in the long run.

Additional tips for EOFY for small businesses

  • Prepare the profit and loss statement that outlines your business expenses and income. For tax purposes, it’s best to consider JobKeeper payments as income.
  • Keeping records of depreciating assets is vital. You should have records of these assets for as long as you have them and for an additional five years following their disposal. Fast-tracking depreciation is also an option for some SMEs now. Find out from your financial advisor if your small business is eligible for it.
  • If your business is a buyer and seller of products, you should undertake a stock take. Your records should consist of every stock on hand along with their respective values. Other records necessary include when and how the stocktake was done and by whom along with the basis of the stock valuation.
  • You should have a summary of your creditors and debtors prepared. During the preparation of this summary, you should take debt repayment plans and/or creditors’ agreements into account. This is especially important if your business has been through a restructuring and is currently implementing a post-COVID recovery plan.
  • You should have digital records and/or scans of all business-related documents that are paper-based. Make sure that all the digital records have backups as well.
  • Ensure that you meet all superannuation obligations that concern payments made to super accounts of employees.
  • You should finalize GST reporting, fringe benefits tax records, and Single Touch Payroll income statements.

So, now that we’ve taken you through the handiest tips for getting your SME prepared for EOFY, we hope that your business will be ready by the time June 30 comes around. To conclude this post, we’d like to wish your business and its entire workforce all the very best for the future.

 

 

The complete guide to managing and preventing bad debts in B2B

The complete guide to managing and preventing bad debts in B2B

There are three key drivers of growth in a business- product, sales, and cash collection; however, the third one rarely receives the attention it deserves. Businesses often focus on sales/marketing and product – while taking cash collection as a given. The success of many B2B companies depends on their ability to manage the receivables collection function efficiently. And this is a function that deserves more attention, investment, and, dare we say, credit than it usually gets.

When you sell a product or perform service on credit, you are also in the B2B accounts receivables collection business. The financial health of your company depends on how well your business can collect on sales. Unfortunately, it is often performed with inadequate forethought to the systems, staff, strategy, and tactics to deliver exceptional results. And businesses find that their customers are using them as a bank, with many overdue invoices impacting the cash flow and growth prospects of the company.

Here we will look at how it is possible to increase your company’s cash flow performance with better planning, execution, and technology

What causes bad debt issues for business?

Credit, or rather the lack of credit-risk strategies, can often lead to bad B2B business debts. The problems can intensify with the lack of efficient operating models and insufficient management focus.

Lack of credit risk strategies

Many businesses do not implement a robust framework for credit-risk assessment. They do not follow the global best practices that reduce customer delinquency and debt collection. Not accounting for credit risk can lead to unhealthy business growth. It expands the customer base but depresses the profitability.

Companies with a credit risk framework often do not monitor pre-delinquency or follow the same approach for each bad debt. These companies seem to follow the same settlement strategies for all delinquents instead of adopting a customized approach for each such customer.

Lack of specialized staff for debt collection

Most companies do not have a specialized debt collection team, and they mostly rely on external agencies for the same. Some outsource this job to call-center agents who lack proper training to assess a customer’s situation. These agents, thus, fail to provide the right settlement options to these customers.

When the responsibility for collections lies between multiple departments, it is difficult to establish clear ownership of credit risk. Often, such companies lack staff that specializes in credit and risk management.

Lack of management focus

Top executives seem to be more occupied by transformation, innovation, and digitization that accounts receivables & collection is usually not in the spotlight. Bad debt figures don’t often feature on the agenda, making it harder to improve the situation.

How does bad debt, when left unchecked, impact a business?

Bad debts are never good for a business. They affect company finances as well as the accounting process. Bad debts often complicate the accounting process making it difficult to comprehend when a sale was completed. Accounting for an unpaid sale requires a variety of collection and reporting procedures.

Preventing bad debts is essential not just for the company’s financial health but also to minimize reputation and relationship risks from the collection process.

How can one manage bad debts effectively?

Debt management is vital to a business as it ensures that the company has enough working capital to reinvest and grow. Effectively managing debt requires some thought and planning and can be controlled with these simple steps.

Implement a credit policy

Most businesses have an informal arrangement for supplying goods and services. Not having clear, written terms of trade can lead to several disputes creating bad debts.

B2B companies require a firm credit policy to ensure their continued growth. Before offering credit to new customers, companies should conduct a thorough credit history and business reference check. Document the terms of business and the credit limits, and initiate business only when your customers understand, accept, and sign the business terms. 

Implementing new payment terms and conditions is better done with new customers or those looking to extend their credit limit. Introducing new terms to existing customers could upset them and affect their loyalty.

Avoid pricing disputes

Customers are more likely to pay you on time when you provide them with the right information on documents and invoices. Disputes can create bad debts that can significantly impact the business.

All your documents- quotations, invoices, contracts, purchase orders, and estimates should refer to your terms and credit policy. Make sure that the invoices and financial statements clearly show the amount due and the due date. The company’s billing address and bank account details should also be present on such documents.

It is a good idea to check with the customer if they need any additional information to expedite the payment. Indicating collection charges for overdue accounts on your invoices and statements can discourage late payments.

Use credit management software solutions

Well-maintained information is the key to good debt management. There are many credit management software solutions available in the market that can ease your company’s debt management process. These software solutions can closely monitor your debtors’ ledger and keep track of the outstanding payments. These solutions also offer regular reporting to help identify trends and patterns before they can impact your business’ cash flow.

Provide multiple payment options

One of the simplest hacks for getting paid outstanding invoices paid quickly is to add a multitude of payment options (credit card, bank transfer, cheques) – from a ‘Pay Now’ button on your invoice to enabling debt financing solutions – where you customers can get the outstanding invoices financed and pay you while they manage the repayments. The simple philosophy is to provide no excuses for your customers to not pay you – something which we adopt here at ezyCollect as well.

Implement AR automation

Accounts Receivables automation modernizes the accounts receivables process through automatic, electronic systems that decrease repetitive and time-consuming tasks. It frees up time for your accounts receivables team to chase payment and get the cash in to mitigate bad debts, rather than wasting time on printing and posting invoices.

AR automation improves the accuracy of invoicing details, leaving little to no room for an excuse for late payments. The AR team gets more time to chase payments and handle exceptions making collections fast with less delinquency. 

Strengthen your delivery systems and implement the practice of keeping signed dockets as proof of delivery. When you automate the AR process, it becomes possible to send invoices ahead of time, discouraging customers from making late payments. It can also send automatic reminders when customers deviate from your trade terms.

Review credit limits of your customers

Review the credit limits of your customers regularly. Look out for warning signals which could indicate that they may be facing financial problems. Check on all customers, even the long-standing ones, to monitor changes in buying habits or an increasing level of debt.

Wherever possible, refrain from doing business only with one substantial customer. Customer concentration risks outweigh the benefits. Be careful of customers who are expanding rapidly as their business growth can sometimes affect their ability to pay. Do exercise caution when handling requests for extending credit.

Stop supplying to customers who do not pay their accounts on time. Initiate a discussion about the situation and try and reach a settlement for payment of past supplies.

Importance of onboarding new customers with comprehensive credit checks

The core of a sound onboarding practice is to ensure that potential clients can pay for your goods or services. Implementing complete business credit checks allows you to access a client’s payment history, giving you useful information about their ability to pay, now and in the future. When you know a client’s potential payment pattern, you can make an informed decision if and how you would like to conduct business with that customer. The existing process of getting trade references and having your customers and sales teams fill out forms isn’t the most effective one – you might consider investing in a service or resource that can complete comprehensive business credit checks for you rapidly and help you transact with the right customers for your business

When you have insight into how a potential client manages financial responsibilities, you can make amendments to your payment terms and credit limits. Customizing payment terms for different customers helps safeguard your business from unreliable clients and cuts down the risk of bad debts. For instance, if a credit check indicates that a potential customer is a payment risk, you may front-load the payment terms or not offer credit at all.

Credit checks can be invaluable to mitigating risks and protecting your business from potentially expensive mistakes.

In Summary

B2B businesses face several challenges when collecting outstanding payments from delinquent customers. Developing a well-structured process, leveraging digitization, and upgrading your teams’ resources and capabilities can maximize recoveries and prevent bad debts. With an increased focus on debt management, companies can reduce high costs and lost income and enhance customer focus, customer engagement, resilience, and profits.

The Australian: ezyCollect has raised $7.1 million

The Australian: ezyCollect has raised $7.1 million

Published in The Australian on February 4, 2020

ABR

Media Release

Fast facts:

  • ezyCollect completed a A$7.1 million funding round in November 2019
  • The platform now helps 1,000+ paying businesses across 24 countries collect payments with A$1.7 billion in receivables under management
  • A majority of businesses using ezyCollect see a 11-day reduction in late payment, giving them the additional funds & confidence to grow faster

SYDNEY, Australia – February 4, 2020 – ezyCollect, an Australian-owned end-to-end order-to-cash platform, has raised $7.1 million to help any business collect payments faster from its customers – an endorsement of the fast-growth company.

ezyCollect raised capital in two rounds over the last 15 months, with investors including Tankstream, Artesian, Macdoch Ventures, Sydney Angels and the family office of Adrian Di Marco, founder of Technology One.

“My investment in ezyCollect is an opportunity to make a real and significant impact on one of the most draining and costly aspects that small to medium businesses face – recovering payments from debtors in a timely fashion. ezyCollect is a powerful and innovative global SaaS solution that automates and streamlines the recovery of debt making life incredibly simple for business.” said Mr Di Marco.

“I believe the strong foundation ezyCollect has built since their very successful capital raising will allow them to deliver their platform internationally to become a hugely successful global SaaS company.”

The platform was built from the ground up by founding partners, AJ Singh and Raj Kuckreja in 2015, who recognised the world of collecting cash was not being facilitated by the traditional means of collecting payments and recovering debts.

“At the time, I was managing a family medical supplies wholesale business. Raj was working with me as an accountant in that business,” said Mr Singh. “The business grew, but cash collection became an increasingly large problem to manage. We hired people, took out loans, and were struggling under the costs of these traditional tactics to make cashflow work.”

“The cashflow conversations were getting more painful as the business grew,” said Mr Kuckreja. “The real issue was a lack of a systematic collections process that incorporated existing accounts staff and
technology to enable automation. Even though the company was listed on BRW’s Fast 100, customers were paying late and there was not much we could do apart from follow up invoices – which became a mess because the business couldn’t afford to keep hiring staff to chase up payments.”

Together, Mr Singh and Mr Kuckreja started their ‘ultimate wishlist’ for a dream software platform that would solve the pain of late payments.

Jane Evio, Head of Customer Success, joined the business in 2016 to support the business in its accelerated growth phase. “The business underwent incredible growth as early customers saw the difference in cashflow was like night and day,” said Ms Evio. “We welcomed our first paying customers
in 2015, and today we help more than 1,000 businesses across 24 countries to collect cash faster using ezyCollect.”

To ensure rapid uptake in a customer base saturated with accounting platforms, the co-founders knew they would need to build a platform that allows small businesses to systemise and customise their payment collection processes via an add-on, rather than a separate system to existing software packages.

ezyCollect succeeds by being easy to set up. Within two minutes a customer can connect their existing accounts software to the cloud-based app and receive immediate assistance from ezyCollect customer service to help setup so data flows immediately to the payments collection process. The company now has the depth of credit and trade data to help predict customer risk, thereby reducing the chance of late payment and bad debt.

“In this way, we provide SMEs a way to automate everything through the system, creating consistency across their entire collection book – from sending SMSs and having an employee make calls at the right
time, to cutting off recalcitrant debtors – while ensuring the right information is at their fingertips throughout the entire process. Small businesses were previously unable to do this at scale,” said Mr
Singh.

About ezyCollect

ezyCollect simplifies debtor management so businesses simply get paid f aster. ezyCollect automates the order-to-cash process and creates a complete ecosystem for disciplined credit control. After seamlessly integrating with accounting or ERP software, ezyCollect simply gets to work:

● Automates a sequence of personalised payment reminders sent via SMS, email, post.
● Provides real-time credit scores and predictive risk analysis of debtors so suppliers can make informed credit decisions
● Maps all debtors’ invoices for high visibility and a single view of overdue accounts.
● Tracks and chases every invoice to payment.
● Offers debtors easy pay options, including online credit card payments.
● Provides quick access to credit check reports, pre-legal demand letters and debt collection agents.

ezyCollect gets businesses paid faster, gets them paid more often, all while reducing the actual time and effort invested into the process. To learn more, visit ezycollect.io or follow on Twitter, LinkedIn or Facebook.

Media contacts:

Natasha David
T: +61 2 8016 2200
ezycollect@espressocomms.com.au